Thursday, March 28, 2013

Dijsselbloem is right!

Just a few
days ago, I was disappointed by Jeroen Dijsselbloem ... and now I am excited
and would like to give him a compliment, even a great compliment!

He
challenged the financial sector, telling them that from now on it would not be
the taxpayer who would pay for the risks they have taken, but themselves and
that the party - where profits were private and losses borne by the community -
was over!

Naturally
he received a lot of criticism for his surprising stance, both as leader of the
Euro group and as Minister of Finance of the Netherlands. The criticism came, not
surprisingly, from people who had set aside a lot of money in the Cypriot
banks. And it came from politicians who said that, okay, he was right to
finally tackle the financial sector, but he should have done this silently and
not openly and publicly as it would stir emotions in the financial markets and
among savers who would no longer trust that their money was safe in the banks. Thus
it could prompt a widespread run on European banks when the next banking crisis
emerged in another European country. And if that country were a large
country, then the whole euro system might tumble. It would not be the first
time that a chain reaction would damage the world financial
system. This young and inexperienced Dutch minister of finance has behaved
incompetently and irresponsibly. He should be replaced as soon as
possible by someone more experienced who is familiar with financial markets and
knows what one can say and do, and what one cannot say and do!

Since late
Tuesday evening I have followed the harsh and emotional attacks on
Dijsselbloem. What was actually the criticism? No more than that he had sown
anxiety among people who work in the financial markets or among people who
defend the markets through thick and thin. And, obviously, among savers who
have put more than 100,000 euros in the Cypriot banks that are now being
"cut up" or dissolved.

Dijsselbloem’s
new policy is clear: "Shareholders, bondholders and big savers: from now
on, you will have to contribute to the rescue or restructuring of a bankrupt
bank."

Good, I
think, finally there is the beginning of a change of policy vis-à-vis the
financial sector! It's high time!

The only
exception I would make is for people and companies in Cyprus that are "unreasonably"
affected by the new policy of Dijsselbloem and his colleagues. If a business
customer of a bank has all his money in a bankrupt bank, it seems unjust that
he will lose an important part of the money that exceeds 100,000 euros. If I
would still be in the position that Fondad would have over 100,000 euros on a
business bank account and I would have established Fondad in Cyprus instead of
the Netherlands, I would now protest and say that our work was made impossible
if our bank was dissolved and we had lost a significant portion of our
revenues.

For the
rest, I have nothing but praise for the initiative by Dijsselbloem, and his
openness about it. Without that openness, without the media echoing his words,
the financial sector could have continued to lean backwards and let the
taxpayer pay for its risks, revenues and losses.

I hope
Dijsselbloem’s initiative will be the beginning of a democratization and
socialization of the international financial system, in which governments and
politicians take back the reins instead of, as they have done way too long,
giving the financial sector free play. The current crisis in Cyprus, in Europe and in the rest of the world, gives
good reasons for such democratization and socialization.

About Me

As a kid I liked numbers and the sound of strings. I considered studying engineering but chose social sciences because of my interest in people. I combine a theoretical interest with a practical, social approach which brought me to the sphere of policy research. I am interested in reducing the disparity between poor and rich, between the powerful and the less powerful.
In 1973 and 1982 I lived in Latin America. In the mid-1980s, I was able to create an international forum to discuss the functioning of the international monetary system and the debt crisis, the Forum on Debt and Development (FONDAD). I established it with the view that the debt crisis of the 1980s was a symptom of a malfunctioning, flawed global monetary and financial system.
I was one of the driving forces behind the creation of the European Network on Debt and Development that was established at the end of the 1980s to help put pressure on European policymakers.
In 1990, before the beginning of the Gulf War, I cofounded the Golfgroep, a discussion group about international politics comprising journalists, scientists, politicians and activists that meets regularly.
The website of FONDAD is www.fondad.org